Danaher Corporation to Acquire X-Rite; Commentary by Cary Sherburne

Wednesday, April 11, 2012

Danaher Corporation announced today that it has entered into a definitive merger agreement with X-Rite, Incorporated (NASDAQ: XRIT) pursuant to which Danaher will acquire X-Rite by making a cash tender offer to acquire all of the outstanding shares of common stock of X-Rite at a purchase price of $5.55 per share, for an enterprise value of approximately $625 million, including debt assumed and net of cash acquired.

X-Rite is a global leader in color measurement technology. The company, which includes design industry color provider Pantone, develops, manufactures, markets and supports innovative color solutions through measurement systems, software, color standards and services. Upon closing X-Rite will be part of Danaher's Product Identification group.

"We are excited about the opportunity to acquire two premier brands in X-Rite and Pantone," said William K. Daniel II, Executive Vice President of Danaher. "Color measurement is an attractive market adjacency to our existing Product Identification businesses. X-Rite's color measurement technologies complement Esko's digital packaging design capabilities to provide customers with a full range of solutions to meet their packaging and design needs. Along with Videojet and Esko, we believe X-Rite and Pantone will further Danaher's leading position in the Product Identification industry and present an attractive value creation opportunity."

The X-Rite Board of Directors has unanimously recommended that X-Rite shareholders accept and tender their shares into the offer. The offer is subject to customary conditions, including tender of a majority of the outstanding shares into the offer (on a fully diluted basis), applicable regulatory approvals and the absence of a material adverse change with respect to X-Rite. Certain shareholders representing approximately 68% of the voting power of X-Rite's outstanding shares intend to tender their shares into the offer. The transaction is expected to be completed during the second quarter of 2012.

Commentary By Cary Sherburne

WhatTheyThink Senior Editor spoke with X-Rite-Pantone Senior VP of Sales and Marketing Vic Stalam upon learning about this news. Stalam said, “We believe that this is the right thing for our customers, for our employees and for our shareholders. I say that because even though X-Rite has great technology and solutions, we were hampered from an investment perspective from scaling up because we are diversified into so many different markets, includingt industrial, automotive, textiles, retail, and, of course, printing and packaging. The one thing Danaher has emphasized during this process is that their focus is on growing companies. They will invest in us and let us grow, allowing us to bring even more new products and solutions to market. It is a very good deal for employees because Danaher is a large company, with revenues of more than $18 billion and more than 59,000 employees. They are more than willing to invest in training people, providing resources around processes, and this also opens up opportunities for employees to move across different markets and companies if they are interested in doing so. Danaher has more than 100 companies in its portfolio. It is good for shareholders because it gives them about a 20% premium over the average stock price for the last 120 days.”

Stalam indicated that X-Rite Pantone will join Esko and VideoJet in the Product Identification subgroup of Danaher, making this business a $1.2 billion subgroup.

Danaher is headquarter in Washington, D.C., and the headquarters for the Industrial Technologies Group, of which Product Identification is a part, are located in Industrial Technologies Group. Stalam indicates that there are no reductions in headcount anticipated at this time, and that according to standard Danaher business practices, X-Rite Pantone will continue to operate as a standalone business unit within the Product Identification Group. “This will also allow us to work more closely with Esko and VideoJet as we grow our product and service offerings for the packaging industry,” he added, “including cross-selling to each other’s customer base.”

Stalam pointed out that Danaher, on average, makes about 10 acquisitions each year, and indicated that he could foresee the possibility of other acquisitions in this space as the company continues to build its portfolio of companies. He concluded, “We are very excited about this turn of events. It gives us the advantages of being part of a very large company with deep pockets, while allowing us to continue to operate as a small company, fast and nimble.”